WASHINGTON—Homebuilding in the U.S. slowed in March to its lowest level since October as the housing market searches for firm footing in the first quarter.
Housing starts fell 8.8% from a month earlier to a seasonally adjusted annual rate of 1.089 million in March, the Commerce Department said Tuesday.
Much of the slowdown was concentrated in the Midwest, while groundbreaking on new homes picked up in the Northeast. The monthly fallback comes despite steady demand for housing.
Starts on single-family homes, which account for roughly two-thirds of the market, fell 9.2% in March from an upwardly revised February rate to 764,000.
Starts on multifamily buildings with five or more units, which include apartments and condominiums, fell 8.5% to a rate of 312,000 in March from the prior month.
New applications for building permits, a bellwether for forthcoming construction, fell 7.7% to 1.086 million, from a revised February rate of 1.177 million.
- Divide Is Growing Between Affordable and Expensive U.S. Cities (April 18)
- Homebuilder Confidence Holds Steady This Month (April 18)
- Pending-Home Sales Jumped 3.5% in February (March 28)
- U.S. New-Home Sales Rose 2% in February (March 23)
- U.S. Existing Home Sales Tumbled 7.1% in February (March 21)
- U.S. NAHB Housing Index Holds at 58 in March (March 15)
Economists surveyed by The Wall Street Journal had expected March housing starts to remain unchanged at 1.18 million in March, and 1.2 million building permits to be issued.
Home-starts figures are volatile and often revised. Tuesday’s report showed new-home starts revised up to 1.194 million in February, compared with an initial estimate of 1.178 million.
Demand for housing has been strong over the past year, with home prices up in many markets amid a shortage of inventory. Housing starts in March were 14.2% higher than in March a year ago, and permits were up 4.6% from a year ago. For the first three months of the year, housing starts are up 14.5% compared with the same period a year ago.
Housing starts in structures with five or more apartments rose 0.3% in March compared with March 2015. Single-family housing starts were up 22.6% in March from the same month a year ago.
Housing was a bright spot in the U.S. economy in 2015, contributing more than a quarter of a percentage point to GDP growth over the year. Historically low-interest rates and ongoing job creation could continue to lend it support, but home builders are reporting shortages of land and labor, leading to delays in projects’ completion. Those delays often serve to push prices up so the builder can recoup costs. Construction levels for new homes remain historically low relative to the levels in the 1990s and 2000s, before the last decade’s housing bubble.
In April, a gauge of home builder sentiment held for the third straight month at 58, its lowest level since May, the National Association of Homebuilders said on Monday. That is still a positive reading, but follows eight months of readings above 60.
The number of existing homes tentatively sold across the U.S. rebounded in February, the National Association of Realtors said in late March. The Commerce Department also reported an uptick in new home sales in February. But completed existing home sales sank in February, the National Association of Realtors said last month, as the supply of homes dwindles and prices climb. In many areas, home-price gains are outpacing wage increases, making it harder for people to save for a down payment.
Existing-home sales figures for March will be released on Wednesday and new home sales data will be released on Monday.
Anna Louie Sussman at firstname.lastname@example.org and Jeffrey Sparshott at email@example.com
Corrections & Amplifications:
The housing starts data were for March of 2016. An earlier version of this article incorrectly stated the results were for February. (4/19)